Betting the House on Small Nuclear Reactors
- Oct 12, 2022 1:54 pm GMT
“…I’m very skeptical with regard to SMRs,” Ketchum said, highlighting the permitting difficulty in siting a project and trying to meet the U.S. Nuclear Regulatory Commission’s standards for safety and security.
They are going to be very expensive, and then you’re going to be taking a bet on the technology…Right now, I look at SMRs as an opportunity to lose money in smaller batches.” – NextEra Energy Chairman, President and CEO John Ketchum / S&P Global Market Intelligence, October 3, 2022
North Carolina House Bill 951 is one of the most aggressive laws in the southeast driving an energy transition from expensive, obsolete sources of electricity to carbon neutral fuels by 2050. The question North Carolina faces is whether the transition will also be expensive and risky, or whether ratepayers will benefit from existing, least-cost technologies.
Gold Plating the Energy Transition
In every scenario Duke Energy presented in recent Carbon Plan hearings, Duke Energy proposes effectively doubling its nuclear fleet. Government regulated monopolies tend to be rewarded by spending as much money as possible on capital investments. There are few incentives for these monopolies to save money for ratepayers, and they have many ‘trust us’ arguments for why they need to take the most expensive path.
In its carbon plan submitted to the N.C.Utilities Commission (NCUC), Duke Energy acknowledged the end of an era for its coal facilities. Though the company includes many options to replace coal-fired energy, the plan’s capital cost projects favor nuclear energy as the key solution to reduce carbon emissions and power our region. NC House Bill 951 directs the development of the Carbon Plan to reduce carbon emissions by 70 percent from 2005 levels by 2030 and to achieve carbon neutrality by 2050. But only one of Duke Energy’s four proposed scenarios hit the 2030 benchmark, because the company anticipates additional time is necessary for new nuclear facility construction. Not only does the company intend to renew the licenses for its existing 11 nuclear plants, its portfolios include up to 21 new reactors by 2050. These capacity additions would mean that over 60 percent of the company’s energy mix would rely on nuclear by mid-century.
Risky and Expensive
Historically, nuclear power has been risky and expensive for ratepayers. Nuclear plants in the Carolinas have typically taken twice as long to construct and have been more than twice as expensive as projected. The southeastern United States has suffered the financial consequences first hand. In Georgia, the Plant Vogtle power station’s reactor construction has taken nearly 10 years – five years longer than anticipated. Vogtle’s projected $14 billion budget is now 100% over budget ($30 billion) and the plant is still not complete. Similarly, South Carolina’s V.C. Summer project was abandoned after years of delays and looming anticipated expenses. The failed project never generated any electricity and left behind $9 billion in sunk costs, saddling South Carolina energy ratepayers with the bill.
Small Modular Nuclear Reactors (SMRs) are Not Least Cost
Duke Energy intends to double its nuclear fleet by 2050. The company’s carbon plan assumes new nuclear power will come from “small modular nuclear reactors” (SMRs). SMRs have a capacity of 300 megawatts (MW) or less and will be designed with modular technology. The concept is that components will be manufactured in a factory, shipped, and then installed on-site. This is different from traditional reactors, which may have capacities of 700 MW or more, have higher up-front capital costs, require frequent fueling, and require larger amounts of land.
At face value, SMRs may sound like a viable option–the smaller modules allow for scalability and greater siting flexibility.Duke Energy claims that flexibility will be necessary to support increased renewable deployment and achieve 2050 targets. For example, SMR advocates propose utilization in underserved, remote communities that lack access to reliable, affordable, and/or clean energy.
BUT if SMRs become commercially available and can be licensed, sited, permitted, constructed, and placed in service by 2032, as Duke proposes, there is little evidence to suggest they represent a least-cost resource solution. According to Brattle Group’s modeling filed in the NC Carbon Plan proceeding, SMRs are not selected as a least-cost resource to meet NC’s 70% GHG reduction goal, even if the compliance date is delayed from 2030 to 2032. That’s true even assuming Duke’s proprietary SMR cost estimate, which is significantly lower than EIA’s. According to Brattle’s analysis, EIA forecasts that the levelized cost of electricity (LCOE) from new SMRs will be approximately $117/MWh for projects entering service in 2032 – more than twice the LCOE for solar-plus-storage resources as forecasted by NREL in the same year.
Small Reactors, Big Questions
Though they are small compared to conventional reactors, SMRs pose outsized radioactive danger and will produce significant amounts of nuclear waste. A recent study by the U.S. Nuclear Regulatory Commission and Stanford University says that SMRs will actually generate up to 30 times more radioactive waste than conventional reactors. This waste would not be moved, but would be stored on site near the communities utilities propose to serve. Duke Energy SMRs will face serious siting challenges, especially given the company’s track record of sloppily handling past energy waste –think of the coal ash spills which cost ratepayers $2.9 billion.
SMRs Don’t Actually Exist Yet
Perhaps the greatest current problem with SMRs is that they don’t actually exist. To date, SMRs have not been deployed anywhere in the world:
- In 2020, Oregon-based company NuScale was approved to develop a demonstration project. It took six years to obtain this approval–the project was initially submitted back in 2014.
- NuScale initially expected to deliver its first reactor in 2016, but the project design has changed (and downsized) many times throughout the development process. Current estimations project operationalization no sooner than 2029.
North Carolina’s House Bill 951 (which mandated the carbon plan) requires a 70 percent emissions reduction by 2030. Duke Energy portfolios based this technology bet uncertain will not meet the law’s target.
Other utility companies are more skeptical of this yet-to-exist energy source. NextEra Energy’s CEO recently called SMRs a “very expensive…bet on technology.” The Institute for Energy Economics and Financial Analysis (IEEFA) says that these early forays into SMRs–such as NuSCale’s project–are already “too late, too expensive, too risky, and too uncertain.”
Available Clean Energy Options
Reliable, safe, cost-effective clean energy exists right now. By the time SMRs come online–if they do at all–they will have been eclipsed in price, build speed, and efficiency by renewables and battery storage technology. Present projections estimate that NuScale’s SMR, if completed early (by 2026), would have a levelized cost of energy (LCOE) of $66.56 per MWh. Other estimates set NuScale’s lower-bound cost at $45/MWh and $94.65/MWh on the high end. Compare these prices to utility-scale solar and wind: the LCOE for each option ranges between $28 and $37/MWh (solar) and $26 and $50/MWh (wind) without government subsidies. Subsidized prices sit at the lower bound of those estimates.
At present, Duke Energy’s planning caps and/or excludes clean, dependable resources and relies on unpredictable future promises. SMRs won’t exist for at least a decade and may never be close to cost competitive with today’s readily available renewables and storage options. Delaying North Carolina’s energy transition with a bet on future technologies means money saving, clean, existing technologies will be underutilized in this decade. In delaying a commitment to renewables, Duke Energy gambles with ratepayers’ wallets.
More Discussion of Small Modular Reactors
Bill Gates’ nuclear startup wins $750M, loses sole fuel source (Canary Media, August 22, 2022)
NuScale, compact nuclear plant developer, plans to go public (Marketplace, January 12, 2022)
Utah Cities Encouraged to Once Again Exit Struggling Nuclear Project (Utah Taxpayers Association, July 19, 2021)
Utah city abandons small modular reactor project (S&P Global Market Intelligence, August 25, 2020)
Analyzing the Cost of Small Modular Reactors and Alternative Power Portfolios (Energy Strategies, May 2019)
Duke shuts down Brunswick nuclear plant ahead of Hurricane Florence (Utility Dive, September 13, 2018)
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